Friday, February 12, 2010

Rise in Retail Sales Brightens Recovery Picture

WASHINGTON (Reuters) - Sales at U.S. retailers rose more than expected in January, suggesting consumers were feeling a bit more comfortable to spend and sustain the economic recovery. The Commerce Department said on Friday total retail sales increased 0.5 percent. In addition, December and November were both revised to show stronger spending.

Analysts polled by Reuters had forecast retail sales increasing 0.3% last month. Compared to January last year, sales were up 4.7% (see chart above).

"It's a nice surprise for the economy, it suggests that the consumer is willing to spend a little. It tells us that retail sales are in a clear recovery," said Kathleen Stephansen, chief economist at Aladdin Capital Holdings in Stamford, Connecticut.

MP: This is probably one the strongest signs yet of a V-shaped economic recovery (see chart).

11 Comments:

I don't want to say that charts like this don't have value, but unless you're used to thinking about the data in terms of percent change vs previous period, it can be misleading. Visually, one's first instinct is to think that sales have recovered to the point they were pre-recession, whereas the data merely suggest that the rate of change has recovered. I think that a chart showing per-capita purchases in these areas in inflation-adjusted dollars would be more useful for understanding retail trends (disclaimer - I own a retail business).

nvestors also fretted over data from the European Union's statistics agency showing that combined gross domestic product in the 16 countries that use the euro rose by a weaker-than-expected 0.1% in the fourth quarter from the previous quarter and was down 2.1% on a year-to-year basis. In the third quarter, GDP rose by 0.4%. Read more on sluggish Europe.

European economies' earlier strength had been a "bright spot" for the U.S. economy, helping boost exports and lifting the U.S. gross domestic product, said Bruce McCain, chief investment strategist at Key Private Bank.

If Europe's previous strength "was merely the acceleration of inventory rebuilding and they're running out of gas, that has some pretty negative implications for us as well," McCain said. "It's a bit of a surprise I think, relative to indications we've had up to this point and it does have some deep and pretty negative implications for overall world growth."

The best news of the day for a sustained recovery was not the retail sales data, but the inventory data for December. The inventory to sales data is now back down to pre-recession levels. This was a very good sign: